TIB FINANCIAL CORP - 10-Q Quarterly Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934


For the Quarterly Period Ended JUNE 30, 2002		Commission File Number 0-29132

TIB FINANCIAL CORP.

(Exact name of registrant as specified in its charter)


FLORIDA		65-0655973

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

99451 OVERSEAS HIGHWAY, KEY LARGO, FLORIDA 33037-7808

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 305-451-4660

Not Applicable

(Former name, former address and former fiscal year,
if changed since last report)

Indicate by mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


YES [X]		NO [ ]

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:


Common Stock, $0.10 Par Value		4,014,925

Class		Outstanding as of August 1, 2002

TABLE OF CONTENTS


CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
Report of Independent Certified Public Accountants

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

TIB FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS


			June 30, 2002		December 31, 2001

ASSETS			(Unaudited)
Cash and due from banks			$	16,195,833	$	21,269,909
Federal funds sold				25,623,000		—
Investment securities held to maturity				—		18,505,912
Investment securities available for sale				58,411,080		35,473,748
Loans, net of deferred loan fees				400,835,845		378,946,753
Less: allowance for loan losses				3,875,563		3,793,842

	Loans, net			396,960,282		375,152,911
Premises and equipment, net				17,866,216		17,633,154
Goodwill				2,305,405		2,305,405
Intangible assets, net				2,128,637		2,276,006
Other assets				19,239,748		21,375,200

	TOTAL ASSETS		$	538,730,201	$	493,992,245

LIABILITIES
Deposits:
	Noninterest-bearing demand		$	100,607,410	$	82,110,626
	Interest-bearing demand and money market			180,086,569		175,742,070
	Savings			30,367,192		26,132,494
	Time deposits of $100,000 or more			65,579,116		56,345,992
	Other time deposits			84,271,901		75,404,677

		Total Deposits		460,912,188		415,735,859
Federal Home Loan Bank advances				20,000,000		25,000,000
Short-term borrowings				2,984,360		733,760
Notes payable				5,250,000		5,250,000
Trust preferred securities				13,000,000		13,000,000
Other liabilities				5,556,275		5,600,534

	TOTAL LIABILITIES			507,702,823		465,320,153

STOCKHOLDERS’ EQUITY
Common stock — $.10 par value: 7,500,000 shares authorized, 3,993,800 and 3,946,100 shares issued				399,380		394,610
Additional paid in capital				8,563,220		8,221,937
Retained earnings				21,454,778		20,019,145
Accumulated other comprehensive income				610,000		36,400

		TOTAL STOCKHOLDERS’ EQUITY		31,027,378		28,672,092

	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	538,730,201	$	493,992,245

(See notes to consolidated financial statements)

TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)


			Three months ended					Six months ended
			June 30,					June 30,

INTEREST INCOME			2002		2001			2002		2001

Loans, including fees			$	6,781,175	$	7,318,304		$	13,419,144	$	14,708,426
Investment securities:
		U.S. Treasury securities		41,176		39,379			81,959		79,158
		U.S. Government agencies and corporations		626,966		733,629			1,216,775		1,603,644
		States and political subdivisions, tax-exempt		66,084		68,413			132,952		137,129
		States and political subdivisions, taxable		98,396		85,280			176,261		114,918
		Other investments		19,909		76,089			87,348		100,544
Interest bearing deposits in other bank				1,354		527			3,068		1,685
Federal funds sold				92,142		380,313			151,058		743,746

	TOTAL INTEREST INCOME			7,727,202		8,701,934			15,268,565		17,489,250

INTEREST EXPENSE
Interest-bearing demand and money market				487,045		1,488,451			970,904		3,184,954
Savings				58,312		123,853			111,099		252,923
Time deposits of $100,000 or more				656,414		993,774			1,340,479		2,002,313
Other time deposits				815,376		1,247,429			1,666,356		2,581,787
Long term debt – trust preferred securities				285,049		214,302			570,566		428,604
Federal Home Loan Bank advances				99,697		—			198,468		—
Notes payable				119,931		173,014			238,549		344,132
Short-term borrowings				7,647		11,773			12,526		28,617

	TOTAL INTEREST EXPENSE			2,529,471		4,252,596			5,108,947		8,823,330

	NET INTEREST INCOME			5,197,731		4,449,338			10,159,618		8,665,920
PROVISION FOR LOAN LOSSES				147,000		135,000			282,000		270,000

	NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			5,050,731		4,314,338			9,877,618		8,395,920
OTHER INCOME
Service charges on deposit accounts				544,897		532,985			1,077,582		1,124,787
Investment securities gains, net				63,843		—			138,127		1,866
Merchant bankcard processing income				1,126,508		1,085,982			2,459,844		2,333,277
Fees on mortgage loans sold at origination				313,767		305,151			673,378		517,573
Gain on sale of government guaranteed loans				23,179		34,557			23,179		34,557
Commissions on sales by Keys Insurance Agency, Inc.				534,820		402,132			934,713		721,330
Retail investment services				41,766		35,162			131,419		74,204
Equity in loss, including goodwill amortization, from investment in ERAS Joint Venture				—		(52,839	)		—		(96,765	)
Other income				278,669		304,979			583,097		562,472

	TOTAL OTHER INCOME			2,927,449		2,648,109			6,021,339		5,273,301
OTHER EXPENSE
Salaries and employee benefits				2,824,793		2,470,902			5,535,297		4,836,961
Net occupancy expense				961,852		846,033			1,925,135		1,615,170
Other expense				2,503,569		2,242,956			4,913,241		4,546,329

	TOTAL OTHER EXPENSE			6,290,214		5,559,891			12,373,673		10,998,460

	INCOME BEFORE INCOME TAX EXPENSE			1,687,966		1,402,556			3,525,284		2,670,761
INCOME TAX EXPENSE				586,400		490,500			1,232,800		931,500

	NET INCOME		$	1,101,566	$	912,056		$	2,292,484	$	1,739,261

BASIC EARNINGS PER SHARE:			$	0.28	$	0.23		$	0.58	$	0.44
DILUTED EARNINGS PER SHARE:			$	0.27	$	0.22		$	0.56	$	0.43

(See notes to consolidated financial statements)

TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)


												Accumulated
												Other
						Comprehensive			Retained			Comprehensive		Common		Additional Paid in
			Total			Income			Earnings			Income (Loss)		Stock		Capital

Balance at December 31, 2001			$	28,672,092					$	20,019,145		$	36,400	$	394,610	$	8,221,937
Comprehensive Income
	Net Income			2,292,484		$	2,292,484			2,292,484
	Other comprehensive income, net of tax expense of $345,100:
		Unrealized holding gain on securities transferred into the available for sale category from the held to maturity category		270,480			270,480
		Net market valuation adjustment on securities available for sale		389,311			389,311
		Less: reclassification adjustment for gains included in net income		(86,191	)		(86,191	)

	Other comprehensive income, net of tax						573,600						573,600

	Comprehensive income					$	2,866,084

Exercise of stock options				343,028											4,770		338,258
Income tax benefit from stock options exercised				3,025													3,025
Cash dividends declared, $.215 per share				(856,851	)					(856,851	)

Balance at June 30, 2002			$	31,027,378					$	21,454,778		$	610,000	$	399,380	$	8,563,220


											Accumulated
											Other
						Comprehensive		Retained			Comprehensive		Common		Additional Paid in
			Total			Income		Earnings			Income (Loss)		Stock		Capital

Balance at December 31, 2000			$	26,236,654				$	17,815,366		$	145,000	$	390,241	$	7,886,047
Comprehensive Income
	Net Income			1,739,261		$	1,739,261		1,739,261
	Other comprehensive income, net of tax expense of $18,000:
		Net market valuation adjustment on securities available for sale		32,000			32,000					32,000

	Comprehensive income					$	1,771,261

Exercise of stock options				154,075										2,575		151,500
Income tax benefit from stock options exercised				25,808												25,808
Cash dividends declared, $.215 per share				(842,825	)				(842,825	)

Balance at June 30, 2001			$	27,344,973				$	18,711,802		$	177,000	$	392,816	$	8,063,355

TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)


		For the six month period ended
		June 30,

		2002			2001

CASH FLOWS FROM OPERATING ACTIVITIES
Net Income		$	2,292,484		$	1,739,261
Adjustments to reconcile net income to net cash provided by operating activities:
	Net amortization of investments		44,394			19,582
	Amortization of intangible assets		147,369			238,075
	Depreciation of premises and equipment		753,870			666,873
	Provision for loan losses		282,000			270,000
	Deferred income tax provision (benefit)		(108,952	)		(18,617	)
	Deferred net loan fees		(77,344	)		(192,007	)
	Investment securities (gains), net		(138,127	)		(1,866	)
	Net loss on sale/disposal of premises and equipment		545			8,158
	(Gain) loss on sale of servicing rights		2,532			(34,557	)
	Net proceeds received from servicing rights sale		33,079			—
	Decrease in other assets		1,855,483			613,842
	Increase (decrease) in other liabilities		(39,722	)		1,043,463
	Equity in loss, including goodwill amortization, from investment in ERAS JV		1,570			96,765

	NET CASH PROVIDED BY OPERATING ACTIVITIES		5,049,181			4,448,972

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities held to maturity			—			(117,500	)
Purchases of investment securities available for sale			(19,194,484	)		(7,303,758	)
Repayments of principal and maturities of investment securities available for sale			3,749,705			2,706,568
Sales of investment securities available for sale			12,025,792			—
Maturities of investment securities held to maturity			—			10,000,000
Loans originated or acquired, net of principal repayments			(22,012,027	)		(29,118,312	)
Purchases of premises and equipment			(999,233	)		(3,307,833	)
Surrender value of purchased life insurance policies			—			(310,000	)
Sales of premises and equipment			11,756			7,785

	NET CASH USED IN INVESTING ACTIVITIES		(26,418,491	)		(27,443,050	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in federal funds purchased and securities sold under agreements to repurchase			2,250,600			652,737
Net decrease in FHLB advances			(5,000,000	)		—
Net increase in demand, money market and savings accounts			27,075,981			43,972,935
Net increase (decrease) in time deposits			18,100,348			(1,958,330	)
Proceeds from exercise of stock options			343,028			154,075
Cash dividends paid			(851,723	)		(840,121	)

	NET CASH PROVIDED BY FINANCING ACTIVITIES		41,918,234			41,981,296

NET INCREASE IN CASH AND CASH EQUIVALENTS			20,548,924			18,987,218
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			21,269,909			23,565,494

CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	41,818,833		$	42,552,712

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid for:
	Interest	$	6,024,655		$	8,640,225
	Income taxes		1,441,000			1,290,000

In June 2002, the Company transferred investment securities in the held to maturity category with a book value totaling $18,507,916 to the available for sale category.

(See notes to consolidated financial statements)

TIB FINANCIAL CORP.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements for TIB Financial Corp. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2002 are not necessarily indicative of trends or results to be expected for the year ended December 31, 2002. For further information, refer to the Company’s consolidated financial statements and footnotes thereto for the year ended December 31, 2001.

The consolidated statements include the accounts of TIB Financial Corp. and its wholly-owned subsidiaries, TIB Bank of the Keys, TIB Software and Services, Inc., TIBFL Statutory Trust I, TIBFL Statutory Trust II, and Keys Insurance Agency, Inc. and the Bank’s two subsidiaries, TIB Government Loan Specialists, Inc. and TIB Investment Center Inc., collectively known as the Company. All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain amounts previously reported on have been reclassified to conform with current period presentation.

NOTE 2 – INVESTMENT SECURITIES

Securities available-for-sale are securities which management believes may be sold prior to maturity for liquidity or other reasons and are reported at fair value, with unrealized gains and losses, net of related income taxes, reported as a separate component of stockholders’ equity. Securities held-to-maturity are those securities for which management has both the ability and intent to hold to maturity and are carried at amortized cost.

In June 2002, the Company transferred all investment securities in the held-to-maturity category with a book value totalling $18,507,916 to the available-for-sale category. The difference between amortized historical cost and fair value for this portfolio of $433,461 was recorded net of tax in other comprehensive income. Therefore, there were no securities classified as held-to-maturity at June 30, 2002. An investment with a book value of approximately $3.7 million was sold in June 2002 resulting in a pretax gain of approximately $63,000.

The amortized cost and estimated fair value of investment securities held-to-maturity at December 31, 2001 is presented below:


	December 31, 2001

	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

U.S. Treasury securities	$	205,897	$	4,572	$	—	$	210,469
U.S. Government agencies and corporations		16,674,255		297,653		—		16,971,908
Other investments		1,625,760		—		—		1,625,760

	$	18,505,912	$	302,225	$	—	$	18,808,137

Other investments consist of stock in the Independent Bankers Bank of Florida and the Federal Home Loan Bank of Atlanta.

The amortized cost and estimated fair value of investment securities available for sale at June 30, 2002 and December 31, 2001 are presented below:


	June 30, 2002

	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

U.S. Treasury securities	$	3,211,602	$	31,843	$	—	$	3,243,445
U.S. Government agencies and corporations		23,248,575		513,137		—		23,761,712
States and political subdivisions-tax-exempt		5,519,958		247,399		—		5,767,357
States and political subdivisions-taxable		7,113,935		61,849		315,313		6,860,471
Mortgage-backed securities		16,714,250		477,881		39,796		17,152,335
Other investments		1,625,760		—		—		1,625,760

	$	57,434,080	$	1,332,109	$	355,109	$	58,411,080


	December 31, 2001

	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

U.S. Treasury securities	$	3,017,174	$	71,896	$	—	$	3,089,070
U.S. Government agencies and corporations		105,757		712		—		106,469
States and political subdivisions-tax-exempt		5,742,409		90,163		693		5,831,879
States and political subdivisions-taxable		5,016,978		49,216		269,075		4,797,119
Mortgage-backed securities		18,359,772		84,675		5,236		18,439,211
Corporate bonds		3,173,358		36,642		—		3,210,000

	$	35,415,448	$	333,304	$	275,004	$	35,473,748

Other investments consist of stock in the Independent Bankers Bank of Florida and the Federal Home Loan Bank of Atlanta.

NOTE 3 – LOANS

Loans are reported at the gross amount outstanding, reduced by net deferred loan fees and an allowance for loan losses. Interest income on loans is recognized over the terms of the loans based on the unpaid daily principal amount outstanding. If the collectibility of interest appears doubtful, the accrual thereof is discontinued. Loan origination fees, net of direct loan origination costs, are deferred and recognized as income over the life of the related loan on a level-yield basis. Gains on sales of government guaranteed loans are recognized as income when the sale occurs.

Major classifications of loans are as follows:


		June 30, 2002		December 31, 2001

Real estate mortgage loans:
	Commercial	$	242,478,467	$	233,025,987
	Residential		73,921,044		68,372,957
	Construction		14,572,387		6,433,674
Commercial loans			45,064,285		46,927,000
Consumer loans			9,427,895		9,636,806
Home equity loans			15,451,316		14,707,222

	Total loans		400,915,394		379,103,646
Net deferred loan fees			79,549		156,893

	Loans, net of deferred loan fees	$	400,835,845	$	378,946,753

NOTE 4 – ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is established through a provision for loan losses charged to expense. The allowance represents an amount which, in management’s judgment, will be adequate to absorb probable losses on existing loans that may become uncollectible. Management’s judgment in determining the adequacy of the allowance is based on evaluations of the collectibility of loans and takes into consideration such factors as current economic conditions that may affect the borrower’s

ability to pay, overall portfolio quality, review of specific problem loans, and changes in the nature and volume of the loan portfolio. Periodic revisions are made to the allowance when circumstances which necessitate such revisions become known. Recognized losses are charged to the allowance for loan losses, while subsequent recoveries are added to the allowance.

Activity in the allowance for loan losses for the six months ended June 30, 2002 and June 30, 2001 follows:


	2002			2001

Balance, January 1	$	3,793,842		$	3,267,873
Provision charged to expense		282,000			270,000
Loans charged off		(213,970	)		(375,547	)
Recoveries of loans previously charged off		13,691			7,148

Balance, June 30	$	3,875,563		$	3,169,474

NOTE 5 – EARNINGS PER SHARE AND COMMON STOCK

Basic earnings per share have been computed based on the weighted average number of common equivalent shares outstanding during the period. Stock options are considered to be common stock equivalents for purposes of calculating diluted earnings per share.

The reconciliation of basic earnings per share to diluted earnings per share is as follows:


			Net Earnings		Common Shares		Per Share Amount

For the three months ended June 30, 2002:
	Basic earnings per common share		$	1,101,566		3,981,945	$	.28
	Effect of dilutive stock options			—		165,142		(.01	)

		Diluted earnings per common share	$	1,101,566		4,147,087	$	.27

For the three months ended June 30, 2001:
	Basic earnings per common share		$	912,056		3,915,870	$	.23
	Effect of dilutive stock options			—		205,796		(.01	)

		Diluted earnings per common share	$	912,056		4,121,666	$	.22


			Net Earnings		Common Shares		Per Share Amount

For the six months ended June 30, 2002:
	Basic earnings per common share		$	2,292,484		3,967,169	$	.58
	Effect of dilutive stock options			—		155,913		(.02	)

		Diluted earnings per common share	$	2,292,484		4,123,082	$	.56

For the six months ended June 30, 2001:
	Basic earnings per common share		$	1,739,261		3,910,790	$	.44
	Effect of dilutive stock options			—		180,084		(.01	)

		Diluted earnings per common share	$	1,739,261		4,090,874	$	.43

NOTE 6 – STOCK BASED COMPENSATION

Under the Bank’s 1994 Incentive Stock Option and Nonstatutory Stock Option Plan (“the Plan”), the Company may grant stock options to persons who are now or who during the term of the Plan become directors, officers, or key executives as defined by the Plan. Stock options granted under the Plan may either be incentive stock options or nonqualified stock options for federal income tax purposes. The Company’s Board of Directors may grant nonqualified stock options to any director, and incentive stock options or nonqualified stock options to any officer, key executive, administrative, or other employee including an employee who is a director of the Company. Subject to the provisions of the Plan, the maximum number of shares of Company common stock that may be optioned or sold is 978,000 shares. Such shares may be treasury, or authorized but unissued, shares of common stock of the Company. If options granted under the Plan expire or terminate for any reason without having been exercised in full, the shares not purchased shall again be available for option for the purposes of the Plan.

Total options granted, exercised, and expired during the six months ended June 30, 2002, were 154,000, 47,700, and 54,686, respectively. As of June 30, 2002, 637,016 options for shares were outstanding.

NOTE 7 – RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 141 addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination and SFAS No. 142 addresses the initial recognition and measurement of intangible assets acquired outside of a business combination whether acquired individually or with a group of other assets. These standards require all future business combinations to be accounted for using the purchase method of accounting. Goodwill will no longer be amortized but instead will be subject to impairment tests at least annually. The Company adopted SFAS No. 141 on July 1, 2001, and adopted SFAS 142 on January 1, 2002. During the second quarter of 2002, the Company engaged a third party to evaluate possible impairment of Keys Insurance Agency, Inc.'s goodwill. The remainder of the Company's goodwill was evaluated internally. Based on the evaluations, the Company has concluded that there is no impairment of goodwill at this time. The Company will continue to evaluate goodwill for impairment on an annual basis.

SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, addresses accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS No. 144 establishes a single accounting model for long-lived assets to be disposed of by sale and expands on the guidance provided by SFAS No. 121 with respect to cash flow estimations. SFAS No. 144 is effective for the Company’s fiscal year beginning January 1, 2002. There will be no current impact of adoption on its financial position or results of operations.

In April 2002, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 145, “Rescission of SFAS No. 4, 44, 64, Amendment of SFAS No. 13, and Technical Corrections.” SFAS No. 4, which was amended by SFAS No. 64, required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in Opinion 30 will now be used to classify those gains and losses. SFAS No. 13 was amended to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The adoption of SFAS No. 145 will not have a current impact on the Company’s consolidated financial statements.

In June 1998, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Under recently cleared Derivatives Implementation Group (DIG) Statement 133 Implementation Issue C13, “Scope Exceptions: When a Loan Commitment is Included in the Scope of Statement 133,” the issuer (but not the holder) must apply Statement 133 to loan commitments related to the origination or acquisition of mortgage loans that will be held for resale. The guidance takes effect the first day of a reporting entity’s first fiscal quarter beginning after April 10, 2002 (that is, July 1, 2002, for the Company). The adoption of this guidance will not have a current impact on the Company’s financial statements.

In July 2002, the FASB approved the issuance of SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” Generally, SFAS No. 146 stipulates that defined exit costs (including restructuring and employee termination costs) are to be recorded on an incurred basis rather than on a commitment basis as is presently required. This statement is effective for exit or disposal activities initiated after December 31, 2002. The Company currently anticipates that adoption of this statement in 2003 will not have a material impact on its financial statements.

NOTE 8 — SEGMENT REPORTING

TIB Financial Corp. has four reportable segments: community banking, merchant bankcard processing, insurance sales, and government guaranteed loan sales and servicing. The community banking segment’s business is to attract deposits from the public and to use such deposits to make real estate, business and consumer loans in its primary service area. The merchant bankcard processing segment processes credit card transactions for local merchants. The insurance agency offers a full line of commercial and residential coverage as well as life, health and annuities. The government guaranteed loan segment originates and sells the government guaranteed portion of loans that qualify for government guaranteed loan programs, such as those offered by the Small Business Administration and the U.S. Department of Agricultural Rural Development Business and Industry Program.

Segment information is presented in accordance with SFAS 131, “Disclosures about Segments of an Enterprise and Related Information.” This standard is based on a management approach, which requires segmentation based upon the Company’s internal organization and disclosure of operating results based upon internal accounting methods.

The results of the Company’s segments are as follows:


			Merchant		Government		Insurance
Three months ended	Community		Bankcard		Guaranteed		Agency		All
June 30, 2002	Banking		Processing		Loans Sales and Servicing		Sales		Other			Totals

Interest income	$	7,718,306	$	—	$	—	$	—	$	8,896		$	7,727,202
Interest expense		2,123,819		—		—		—		405,652			2,529,471

Net interest income		5,594,487		—		—		—		(396,756	)		5,197,731
Other income		1,172,318		1,126,508		52,037		534,820		41,766			2,927,449
Depreciation and amortization		415,873		11,058		2,858		14,145		1,250			445,184
Other expense		4,460,012		909,819		23,098		418,025		181,076			5,992,030

Pretax segment profit (loss)	$	1,890,920	$	205,631	$	26,081	$	102,650	$	(537,316	)	$	1,687,966


			Merchant		Government			Insurance
Three months ended	Community		Bankcard		Guaranteed			Agency			All
June 30, 2001	Banking		Processing		Loans Sales and Servicing			Sales			Other			Totals

Interest income	$	8,685,200	$	—	$	—		$	—		$	16,734		$	8,701,934
Interest expense		3,864,608		—		—			—			387,988			4,252,596

Net interest income		4,820,592		—		—			—			(371,254	)		4,449,338
Other income		1,116,101		1,085,982		61,571			402,132			35,162			2,700,948
Equity in income (loss), including goodwill amortization, from investment in ERAS JV		—		—		—			—			(52,839	)		(52,839	)
Depreciation and amortization		392,454		10,606		7,737			48,552			1,186			460,535
Other expense		3,714,322		937,509		83,548			353,812			145,165			5,234,356

Pretax segment profit (loss)	$	1,829,917	$	137,867	$	(29,714	)	$	(232	)	$	(535,282	)	$	1,402,556


			Merchant		Government		Insurance
Six months ended	Community		Bankcard		Guaranteed		Agency		All
June 30, 2002	Banking		Processing		Loans Sales and Servicing		Sales		Other			Totals

Interest income	$	15,250,870	$	—	$	—	$	—	$	17,695		$	15,268,565
Interest expense		4,298,487		—		—		—		810,460			5,108,947

Net interest income		10,952,383		—		—		—		(792,765	)		10,159,618
Other income		2,417,245		2,459,844		78,118		934,713		131,419			6,021,339
Depreciation and amortization		843,249		21,558		6,953		26,926		2,553			901,239
Other expense		8,643,850		1,992,483		46,221		767,574		304,306			11,754,434

Pretax segment profit (loss)	$	3,882,529	$	445,803	$	24,944	$	140,213	$	(968,205	)	$	3,525,284

Segment Assets	$	535,116,503	$	88,233	$	159,344	$	2,384,191	$	981,930		$	538,730,201


					Government
			Merchant		Guaranteed			Insurance
Six months ended	Community		Bankcard		Loans Sales and			Agency			All
June 30, 2001	Banking		Processing		Servicing			Sales			Other			Totals

Interest income	$	17,455,634	$	—	$	—		$	—		$	33,616		$	17,489,250
Interest expense		8,048,046		—		—			—			775,284			8,823,330

Net interest income		9,407,588		—		—			—			(741,668	)		8,665,920
Other income		2,147,429		2,333,277		93,826			721,330			74,204			5,370,066
Equity in income (loss), including goodwill amortization, from investment in ERAS JV		—		—		—			—			(96,765	)		(96,765	)
Depreciation and amortization		773,135		21,087		15,318			93,035			2,373			904,948
Other expense		7,345,161		1,963,219		147,606			665,898			241,628			10,363,512

Pretax segment profit (loss)	$	3,436,721	$	348,971	$	(69,098	)	$	(37,603	)	$	(1,008,230	)	$	2,670,761

Segment Assets	$	479,618,015	$	87,707	$	181,770		$	2,383,026		$	1,845,647		$	484,116,165

NOTE 9 – GOODWILL AND INTANGIBLE ASSETS

In accordance with SFAS 142, the following information is presented on the Company’s goodwill and intangible assets:


Amortized Intangible Assets		Gross Carrying		Accumulated
at June 30, 2002:		Amount		Amortization		Net Book Value

Core Deposit Intangible		$	2,941,234	$	858,611	$	2,082,623
Excess Servicing Fees			110,495		64,481		46,014

	Total	$	3,051,729	$	923,092	$	2,128,637

Intangible amortization expense totaled $147,369 for the six months ended June 30, 2002.

There were no changes in the carrying amount of goodwill for the six months ended June 30, 2002. The components of goodwill were as follows:


	Government
	Guaranteed Loan		Insurance Agency		Investment in ERAS
	Sales and Servicing		Sales		JV (a)		Totals

Balance as of January 1, 2002 and June 30, 2002	$	155,232	$	2,010,211	$	139,962	$	2,305,405

(a)

Investment in ERAS JV is reported as “All Other” in the segment reporting table in Note 8.

The following tables indicate what reported net income would have been had goodwill not been amortized:


		For the six months ended

		June 30, 2002		June 30, 2001

Reported net income		$	2,292,484	$	1,739,261
Add back: Goodwill amortization, net of tax effect			—		70,693

Adjusted net income		$	2,292,484	$	1,809,954

Basic earnings per share:
	Reported net income	$	0.58	$	0.44
	Goodwill amortization		—		0.02

	Adjusted net income	$	0.58	$	0.46

Diluted earnings per share:
	Reported net income	$	0.56	$	0.43
	Goodwill amortization		—		0.01

	Adjusted net income	$	0.56	$	0.44


		For the three months ended

		June 30, 2002		June 30, 2001

Reported net income		$	1,101,566	$	912,056
Add back: Goodwill amortization, net of tax effect			—		35,346

Adjusted net income		$	1,101,566	$	947,402

Basic earnings per share:
	Reported net income	$	0.28	$	0.23
	Goodwill amortization		—		0.01

	Adjusted net income	$	0.28	$	0.24

Diluted earnings per share:
	Reported net income	$	0.27	$	0.22
	Goodwill amortization		—		0.01

	Adjusted net income	$	0.27	$	0.23

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain of the matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act and as such may involve known and unknown risk, uncertainties and other factors which may cause the actual results, performance or achievements of TIB Financial Corp. to be materially different from future results described in such forward-looking statements. Actual results may differ materially from the results anticipated in these forward looking statements due to a variety of factors, including, without limitation: the effects of future economic conditions; governmental monetary and fiscal policies, as well as legislative and regulatory changes; the risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, and interest rate risks; the effects of competition from other commercial banks, thrifts, consumer finance companies, and other financial institutions operating in the Company’s market area and elsewhere. All forward looking statements attributable to the Company are expressly qualified in their entirety by these cautionary statements. The Company disclaims any intent or obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise.

The following discussion addresses the factors that have affected the financial condition and results of operations of TIB Financial Corp. (the “Company”) as reflected in the unaudited consolidated statement of condition as of June 30, 2002, and statement of income for the three and six months ended June 30, 2002.

The Company’s net income of $1,101,566 for the second quarter of 2002 was a 20.8% increase compared to $912,056 for the same period last year. The $189,510 increase in net income is attributed to the net of the following: an increase of $736,393 or 17.1%, in net interest income after provision for loan losses; an increase of $279,340, or 10.5%, in other income; an increase in other expense of $730,323, or 13.1%; and an increase in income tax expense of $95,900 or 19.6%. Basic and diluted earnings per share for the second quarter of 2002 were $0.28 and $0.27 respectively as compared to $0.23 and $0.22 per share in the previous year’s quarter.

The Company’s net income of $2,292,484 for the first six months of 2002 was a 31.8% increase compared to $1,739,261 for the same period last year. The $553,223 increase in net income is attributed to the net of the following: an increase of $1,481,698 or 17.6%, in net interest income after provision for loan losses; an increase of $748,038, or 14.2%, in other income; an increase in other expense of $1,375,213, or 12.5%; and an increase in income tax expense of $301,300 or 32.3%. Basic and diluted earnings per share for the first six months of 2002 were $0.58 and $0.56 respectively as compared to $0.44 and $0.43 per share in the previous year’s quarter.

Book value per share increased to $7.77 at June 30, 2002 from $7.27 at December 31, 2001. The Company paid a quarterly dividend of $0.1075 per share in each of the first and second quarters of 2002 and 2001.

Performance of banks is often measured by various ratio analyses. Two widely recognized indicators are return on average equity and return on average assets. Annualized return on average equity for the six months ended June 30, 2002 was 15.40% on average equity of $29,767,000, compared to 12.92% on average equity of $26,926,000 for the same period in 2001.

Annualized return on average assets of $518,946,000 for the six months ended June 30, 2002 was 0.88%, compared to 0.74% on average assets of $470,038,000 for the same period in 2001.

The Company’s expansion into Southwest Florida began in 2001 with the opening of two new branch facilities. On July 16, 2001, its office on J & C Boulevard in Naples opened and is located in an industrial park and trade center. This facility is targeted to serve the small to midsize commercial customer and houses the commercial lending offices for the area. On December 3, 2001, a full service retail branch opened in Bonita Springs and is situated in the fast growing area north of Naples in southern Lee County. Currently under construction is the Company’s third branch which is located in downtown Naples and is expected to open in the fourth quarter of 2002. Opening new branch facilities is dilutive to earnings in the near term but is a factor in achieving sustainable long-term growth.

Net interest income is one measurement of how management has balanced the Company’s interest rate sensitive assets and liabilities. The Company’s net interest income is its principal source of income. Interest earning assets for the Company include loans, federal funds sold, interest bearing deposits in other banks, and investment securities. The Company’s interest-bearing liabilities include its deposits, federal funds purchased, notes payable related to Company shares repurchased, trust preferred securities, advances from the Federal Home Loan Bank, and other short-term borrowings. Net interest income increased $1,493,698 or 17.2% to $10.2 million, in the six months ended June 30, 2002 as compared to the same period last year. The prime rate as published in the Wall Street Journal began 2001 at 9.5% and by December 2001 it had declined to 4.75% due to declines in the Federal Funds Rate which were matched by all the major banks to this key lending rate. The majority of the Bank’s loans are indexed to the Prime Rate and most of those reset within every six months. The average yield on interest earning assets for the first six months of 2002 was 6.61% which was a decrease of 174 basis points compared to the 8.35% yield earned during the first six months of 2001. The average cost of interest bearing deposits declined 241 basis points from 4.77% during the first six months of 2001 to 2.36% for the comparable period in 2002, and the rate of all interest bearing liabilities decreased 239 basis points, from 5.04% in 2001 to 2.65% in 2002. The Company’s net interest margin increased to 4.41% in the first six months of 2002 compared to 4.16% in the first six months of 2001.

The following table presents average balances of the Company, the taxable-equivalent interest earned, and the rate paid thereon during the six months ended June 30, 2002 and June 30, 2001.


							2002								2001

				AVERAGE			INCOME/		YIELDS			AVERAGE			INCOME/		YIELDS
(Dollars in thousands)				BALANCES			EXPENSE		RATES			BALANCES			EXPENSE		RATES

	Interest-earning assets:
			Loans (1)(2)	$	390,325		$	13,432		6.94	%	$	327,767		$	14,708		9.05	%
			Investment securities — taxable		53,667			1,562		5.87	%		59,315			1,898		6.45	%
			Investment securities – tax exempt (2)		5,558			202		7.31	%		5,738			208		7.30	%
			Interest bearing deposits in other banks		348			3		1.78	%		54			2		6.28	%
		Federal funds sold			18,108			151		1.68	%		30,955			744		4.85	%

Total interest-earning assets					468,006			15,350		6.61	%		423,829			17,560		8.35	%

Non-interest-earning assets:
	Cash and due from banks				13,768								12,522
	Investment in ERAS				255								965
	Premises and equipment, net				17,492								16,110
	Allowances for loan losses				(3,900	)							(3,226	)
	Other assets				23,325								19,838

Total non-interest earning assets					50,940								46,209

Total assets				$	518,946							$	470,038

	Interest-bearing liabilities:
		Interest bearing deposits:
		NOW accounts		$	51,118			146		0.58	%	$	41,539			291		1.41	%
		Money market			127,917			825		1.30	%		123,959			2,894		4.71	%
		Savings deposits			29,144			111		0.77	%		23,849			253		2.14	%
		Other time deposits			141,060			3,007		4.30	%		149,564			4,584		6.18	%

Total interest-bearing deposits					349,239			4,089		2.36	%		338,911			8,022		4.77	%
	Other interest-bearing liabilities:
	Notes payable				5,250			238		9.16	%		5,250			344		13.22	%
	Short-term borrowings and FHLB advances				21,726			211		1.96	%		1,106			29		5.22	%
	Trust preferred securities				13,000			571		8.85	%		8,000			428		10.80	%

Total interest-bearing liabilities					389,215			5,109		2.65	%		353,267			8,823		5.04	%

Non-interest bearing liabilities and stockholders’ equity:
	Demand deposits				94,605								82,836
	Other liabilities				5,359								7,009
	Stockholders’ equity				29,767								26,926

Total non-interest bearing liabilities and stockholders’ equity					129,731								116,771

Total liabilities and stockholders’ equity				$	518,946							$	470,038

Interest rate spread										3.96	%							3.31	%

Net interest income							$	10,241							$	8,737

Net interest margin (3)										4.41	%							4.16	%

(1)		Average loans include non-performing loans.

(2)		Interest income and rates include the effects of a tax equivalent adjustment using a Federal tax rate of 34% in adjusting tax exempt interest on tax exempt investment securities and loans to a fully taxable basis.

(3)		Net interest margin is net interest income divided by average total interest-earning assets.

The table below details the components of the changes in net interest income. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volumes, changes due to rates, with the changes in both volumes and rates allocated to these two categories based on the proportionate absolute changes in each category.


		2002 compared to 2001 (1)
		Due to changes in

(In thousands)								Net
		Average			Average			Increase
INTEREST INCOME		Volume			Rate			(Decrease)

Loans (2)		$	5,652		$	(6,928	)	$	(1,276	)
Investment Securities (2)			(180	)		(162	)		(342	)
Interest bearing deposits in other banks			4			(3	)		1
Federal Funds sold			(230	)		(363	)		(593	)

	Total interest income		5,246			(7,456	)		(2,210	)

INTEREST EXPENSE
NOW Accounts			153			(298	)		(145	)
Money Market			269			(2,338	)		(2,069	)
Savings deposits			131			(273	)		(142	)
Other time deposits			(249	)		(1,328	)		(1,577	)
Notes payable			—			(106	)		(106	)
Trust preferred securities			353			(210	)		143
Short-term borrowings and FHLB advances			246			(64	)		182

	Total interest expense		903			(4,617	)		(3,714	)

Change in net interest income		$	4,343		$	(2,839	)	$	1,504

(1)		The change in interest due to both rate and volume has been allocated to the volume and rate components in proportion to the relationship of the dollar amounts of the absolute change in each.

(2)		Interest income includes the effects of a tax equivalent adjustment using a federal tax rate of 34% in adjusting tax exempt interest on tax exempt investment securities and loans to a fully taxable basis.

Based on management’s evaluation of specific loans and inherent losses within the loan portfolio and other factors, the provision for loan losses was $147,000 for the second quarter of 2002 as compared to $135,000 for the second quarter of 2001. Gross charged off loans for the second quarter of 2002 were $213,970 with recoveries of $9,217, compared to $11,282 in charge offs and $2,662 in recoveries in the second quarter of 2001.

The provision for loan losses was $282,000 for the first six months of 2002 as compared to $270,000 in the first six months of 2001. Gross charged off loans for the first six months of 2002 were $213,970 with recoveries of $13,691, resulting in an annualized net charge-off rate of .10% of total loans. Approximately $211,000 of the current year charge off relates to the non-guaranteed portion of one loan. This compares to net charge offs during the same period last year of $368,399. Approximately $346,000 of the prior year charge-off relates to the nonguaranteed portion of two loans made to one customer. The allowance for loan losses amounted to $3,875,563 and $3,793,842 at June 30, 2002 and December 31, 2001, respectively.

The Company’s formalized process for assessing the adequacy of the allowance for loan losses and the resultant need, if any, for periodic provisions to the allowance charged to income, includes both individual loan analyses and loan pool analyses. Individual loan analyses are periodically performed on loan relationships of a significant size, or when otherwise deemed necessary, and primarily encompass commercial real estate and other commercial loans. The result is that commercial real estate loans and commercial loans are divided into the following risk categories: Pass, Special Mention and Substandard or worse. When appropriate a specific reserve will be established for individual loans. Otherwise, the Company allocates an allowance for each risk category. The allocations are based on factors including perceived economic conditions (local, national and global), perceived strength of the Company’s management, recent trends in loan loss history, and concentrations of credit.

Home equity loans, residential loans and consumer loans generally are not analyzed individually. These loans are grouped into pools and assigned risk categories based on their current payment status and management’s assessment of risk inherent in the various types of loans. As above, when appropriate, a specific reserve will be established for individual loans. Otherwise, the Company allocates an allowance for each loan classification. The allocations are based on the same factors mentioned above.

Non-performing assets include non-accrual loans, accruing loans contractually past due 90 days or more, and other real estate. Loans are placed on non-accrual status when management has concerns relating to the ability to collect the loan principal and interest and generally when such loans are 90 days or more past due. A loan is considered impaired if it is in a nonaccruing status. Non-performing assets for the periods ended June 30, 2002 and December 31, 2001 were as follows:


	June 30, 2002			December 31, 2001

Loans on nonaccrual	$	1,108,517		$	1,590,391
Loans 90 days past due (a)		—			—
Other real estate owned (b)(d)		1,569,874			550,000
Other assets (b)		2,364,224			2,290,432

Total non-performing assets	$	5,042,615		$	4,430,823

Percentage of non-performing assets to total loans (c)		1.25	%		1.16	%

(a)		Loans 90 days past due exclude loans on nonaccrual that are reported separately.

(b)		The Bank had made a loan originally totaling $10,000,000 to construct a lumber mill in north Florida. Of this amount, $6,400,000 had been sold by the Bank to other lenders. The loan was partially guaranteed as to principal and interest by the U.S. Department of Agriculture (USDA). In addition to business real estate and equipment, the loan was collateralized by the business owner’s interest in a trust. Under provisions of the trust agreement, beneficiaries cannot receive trust assets until November 2010. At December 31, 2000, the loan was past due greater than 90 days but was still maintained as an accruing loan because of the USDA guarantee and collateral value. During 2001, upon completion of foreclosure on the underlying collateral, the non-guaranteed portion of this loan and interest accrued through the foreclosure date was reclassified into other real estate ($550,000) and other assets (approximately $1,886,000) based on the fair value of the underlying-collateral. In addition, the bank has capitalized liquidation costs and protective advances totaling approximately $478,000 and $404,000 at June 30, 2002 and December 31, 2001, respectively, which the Bank expects to be fully reimbursed by the USDA. The non guaranteed principal and interest ($1,886,000) and the capitalized costs totaling approximately $478,000 and $404,000 at June 30, 2002 and December 31, 2001, respectively are included as “other assets” in the table above. The portion of this loan guaranteed by the USDA was approximately $1.6 million at June 30, 2002 and December 31, 2001, and is accruing interest. Accrued interest on this loan totals approximately $457,000 and $409,000 at June 30, 2002 and December 31, 2001, respectively. Under the USDA program, eligible portions of both principal and interest are covered under the USDA guarantee. Management believes the present value of all assets pledged as collateral for this loan exceeds the unpaid amount.

		Florida Statutes require that repossessed real property be liquidated or charged off within five years, and repossessed personal property be liquidated or charged off within six months. The Bank was awarded title to the property on June 12, 2001, and , therefore, the time constraints imposed by Florida Statutes required that the personal property be disposed of by December 10, 2001. The Bank applied to the State of Florida for an extension to carry the repossessed personal property on the Bank’s books. The Department of Banking and Finance of the State of Florida granted an extension to the Bank to carry the personal property on its books until December 11, 2002. On June 4, 2002, the Bank requested another extension from the State. The Bank is currently awaiting their response. There is no assurance that this extension will be granted and, therefore, the possibility exists that the non guaranteed principal and interest totaling approximately $1.9

million at June 30, 2002, may need to be charged off for regulatory purposes in December 2002 if the property has not yet been liquidated. Since the Company believes this amount is ultimately realizable, the Company does not anticipate that this amount will be required to be written off on its financial statements prepared under generally acceptable accounting principles. Even if the amount is required to be charged off for regulatory purposes, the Bank and Company would remain well capitalized under the capital adequacy guidelines established by the federal bank regulators.

(c) For the purpose of this computation, total loans include other real estate owned and other assets.

(d) Other real estate owned increased approximately $1.0 million from December 31, 2001 to June 30, 2002, due to the repossession of two commercial properties in the second quarter of 2002.

Other income for the second quarter of 2002 was $2,927,449. This represents a $279,340 increase over the prior year quarter. For the six month period ended June 30, 2002, other income increased $748,038 to $6,021,339 from $5,273,301 in the comparable period last year. The 14.2% increase in non interest income is attributable to an increase of $126,567 in merchant bankcard processing income; a $136,261 increase in net investment security gains; a $213,383 increase in commissions on sales by Keys Insurance; a $57,215 increase in retail investment services; a $96,765 decrease in equity in loss, including goodwill amortization, from the investment in ERAS JV; a $20,625 increase in other income; a $155,805 increase in fees on mortgage loans sold at origination; offset by a decrease of $47,205 in service charges on deposit accounts, and a $11,378 decrease in gain on sale of government guaranteed loans. The increases in merchant bankcard, commissions on sales by Keys Insurance, fees on mortgage loans sold at origination, and retail investment services income is primarily a result of volume increases, and also additional activity as a result of the Company’s expansion into Southwest Florida. The increase in net gain from the sale of securities is primarily the result of the sale of two corporate securities which netted a gain of approximately $65,000 in the first quarter of 2002 and the sale of two agency securities in the second quarter of 2002 that netted a gain of approximately $64,000. Prior to January 1, 2002, the Company accounted for its investment in ERAS JV under the equity method. This resulted in a net loss of $96,765 in the first six months of 2001. On December 31, 2001, the Company sold two thirds of its 30% interest in ERAS JV. At the resulting 10% ownership, the remaining investment in ERAS is accounted for under the cost method in 2002.

Other expense for the second quarter of 2002 was $6,290,214. This represents a $730,323, or 13.1% increase over the prior year quarter. For the six month period ended June 30, 2002, other expense increased $1,375,213 to $12,373,673 from $10,998,460 in the comparable period last year. The 12.5% increase in non interest expense is attributable to salaries and employee benefits increasing $698,336, net occupancy expense increasing $309,965, and other expense increasing $366,912. As discussed previously, the Bank opened two new locations during the second half of 2001. The addition of these facilities has caused the bank to hire additional personnel and incur additional operating costs that were absent in the comparable period during 2001.

Total assets at June 30, 2002 were $538,730,201, up from total assets of $493,992,245 at December 31, 2001. Loans net of deferred loan fees increased $21,889,092 to $400,835,845 for the first six months of 2002 from year end 2001. Also, in the same period, federal funds sold increased $25,623,000, and investment securities increased $4,431,420. Asset growth was primarily funded by an increase in deposits of $45,176,329, or 10.9%. At June 30, 2002, the Company had $2,984,360 in short-term borrowings compared to $733,760 at December 31, 2001. Short-term borrowings consist of securities sold under agreements to repurchase and Treasury tax deposits. Advances from the Federal Home Loan Bank totaled $20 million at June 30, 2002 as compared to $25 million at December 31, 2001.

The Company entered into an agreement with the Company’s largest shareholder effective July 1, 2000, to purchase 525,000 shares of the Company’s common stock in exchange for four subordinated debt instruments of the Company totaling $5,250,000. The interest rate on these original notes was 13%, with interest payments required quarterly. The principal balance was payable in full on October 1, 2010, the maturity date of the notes, and the notes could be prepaid by the Company at par any time after July 1, 2003. Subsequent to December 31, 2001, the Company renegotiated the notes payable. Effective January 1, 2002, the interest rate was reduced to 9%, the option to prepay was extended to July 1, 2007, and the maturity date was extended to January 1, 2012. The debt issued by the Company qualifies as Tier 2 capital at the holding company level under applicable regulatory capital guidelines.

In July 2001, the Company participated in a pooled offering of trust preferred securities in the amount of $5 million. The Company formed TIBFL Statutory Trust II (the “Trust”), a wholly-owned statutory trust subsidiary, for the purpose of issuing the trust preferred securities. The trust used the proceeds from the issuance of the trust preferred securities to acquire junior subordinated notes of the Company. The trust preferred securities essentially mirror the debt securities, carrying a cumulative preferred dividend at a variable rate equal to the interest rate on the debt securities (three month LIBOR plus 358 basis points). The initial rate in effect at the time of issuance was 7.29% and is subject to change quarterly. The rate in effect at June 30, 2002 is 5.50125%. The debt securities and the trust preferred securities each have 30-year lives. The trust preferred securities and the debt securities are callable by the Company or the Trust, at their respective option after five years, and at varying premiums and sooner in specific events, subject to prior approval by the Federal Reserve Board, if then required. For federal regulatory purposes, the Company plans to treat the trust preferred securities as Tier 1 capital up to the maximum amount allowed, and the remainder as Tier 2 capital.

On October 31, 2000, the Company purchased Keys Insurance Agency of Monroe County, Inc. from a Company director. Keys Insurance Agency, Inc. (the new name subsequent to the purchase) has three offices in the Florida Keys and one office in Naples. Keys Insurance Agency, Inc. offers a full line of commercial and residential hazard insurance coverage as well as life and health insurance and annuities. Total consideration paid at closing for the agency was $1,870,000. This was comprised of $220,000 in the Company’s common stock and $1,650,000 in cash paid at closing. Under the purchase agreement, annual cash payments of $110,000 are to be made following each of the first three anniversaries of the closing date, subject to the agency’s ability to achieve certain earning thresholds. Any of this additional consideration that is paid at the end of each contingency period, will at that time be recorded as goodwill and increase the total recorded purchase price of the agency. No amount was required to be paid in 2001.

On September 25, 2001, Keys Insurance Agency, Inc. purchased BonData Group Limited, Inc., a Ft. Myers, Florida based insurance agency specializing in surety bond underwriting and placement. Total consideration paid at closing for the agency was $273,000. This was comprised of approximately $68,000 in the Company’s common stock and approximately $205,000 in cash. Under the purchase agreement, annual cash payments of $24,000 are to be made following each of the first two anniversaries of the closing date, subject to the agency’s ability to achieve certain earning thresholds. Any of this additional consideration that is paid at the end of each contingency period, will at that time be recorded as goodwill and increase the total recorded purchase price of the agency.

In June of 2002, the Company transferred investment securities in the held to maturity category to the available for sale category. The book value at the time of transfer was $18,507,916 and the market value was $18,941,377. Securities in the available for sale category allow for more flexibility in managing the investments for the Bank. Since changes in market value do not affect the regulatory capital ratios of the Bank there is no compelling reason to not have the ability to sell securities when appropriate. Securities maintained in the held to maturity portfolio does limit the volatility of GAAP capital, however, as the Bank has trended toward higher loan to deposit ratios (therefore low investments to asset ratios) the probable amount of this volatility has become much less significant relative to the size of the Bank.

CAPITAL ADEQUACY

Federal banking regulators have established certain capital adequacy standards required to be maintained by banks and bank holding companies. The minimum requirements established in the regulations are set forth in the table below, along with the actual ratios at June 30, 2002 and December 31, 2001:


		Well			Adequately
		Capitalized			Capitalized			June 30, 2002			December 31, 2001
		Requirement			Requirement			Actual			Actual

Tier 1 Capital (to Average Assets)
	Consolidated		>5	%		>4	%		6.9	%		7.1	%
	Bank		>5	%		>4	%		8.3	%		8.5	%
Tier 1 Capital (to Risk Weighted Assets)
	Consolidated		>6	%		>4	%		8.6	%		8.4	%
	Bank		>6	%		>4	%		10.3	%		10.2	%
Total Capital (to Risk Weighted Assets)
	Consolidated		>10	%		>8	%		11.4	%		11.6	%
	Bank		>10	%		>8	%		11.3	%		11.1	%

Management believes, as of June 30, 2002, that the Company and the Bank met all capital requirements to which they are subject. The Company has included in Tier 1 Capital a portion of the trust preferred securities that were issued in September 2000 and July 2001.

LIQUIDITY

The goal of liquidity management is to ensure the availability of an adequate level of funds to meet the loan demand and deposit withdrawal needs of the Company’s customers. The Company manages the levels, types and maturities of earning assets in relation to the sources available to fund current and future needs to ensure that adequate funding will be available at all times.

The Bank has invested in Federal Home Loan Bank stock for the purpose of establishing credit lines with the Federal Home Loan Bank. The credit availability to the Bank is equal to 14 percent of the Bank’s total assets as reported on the most recent quarterly financial information submitted to the regulators. The credit availability approximated $75.0 million at June 30, 2002, under which $20 million was outstanding. Any advances are secured by the Bank’s one-to-four family residential mortgage loans.

The Bank has an unsecured line of credit for federal funds purchased from its principal correspondent bank totaling $7,500,000. Securities sold under agreements to repurchase (wholesale) represent a wholesale agreement with a correspondent bank which is collateralized by a U.S. Treasury note. The Bank also has several securities sold under repurchase agreements (retail) with commercial account holders whereby the Bank sweeps the customer’s accounts on a daily basis and pays interest on these amounts. These agreements are collateralized by investment securities chosen by the Bank.

RATE SENSITIVITY

The Company’s interest rate sensitivity position at June 30, 2002 is presented in the table below.


	3 months			4 to 6			7 to 12			1 to 5			Over 5
(Dollars in thousands)	or less			Months			Months			years			Years			Total

Interest-earning assets:
Loans	$	182,742		$	33,693		$	31,674		$	94,731		$	58,075		$	400,915
Investment securities-taxable		4,227			721			4,315			10,289			33,092			52,644
Investment securities-tax exempt		478			—			—			593			4,696			5,767
Federal funds sold		25,623			—			—			—			—			25,623
Interest bearing deposit in other bank		275			—			—			—			—			275
Note receivable		—			264			—			—			—			264

Total interest-bearing assets		213,345			34,678			35,989			105,613			95,863			485,488

Interest-bearing liabilities:
NOW accounts (A)		20,618			—			—			—			30,928			51,546
Money Market		128,541			—			—			—			—			128,541
Savings Deposits (B)		—			—			30,367			—			—			30,367
Other time deposits		34,988			25,743			50,377			38,598			145			149,851
Notes payable		—			—			—			—			5,250			5,250
Trust preferred securities		5,000			—			—			—			8,000			13,000
Other borrowings		22,984			—			—			—			—			22,984

Total interest-bearing liabilities		212,131			25,743			80,744			38,598			44,323			401,539

Interest sensitivity gap	$	1,214		$	8,935		$	(44,755	)	$	67,015		$	51,540		$	83,949

Cumulative interest sensitivity gap	$	1,214		$	10,149		$	(34,606	)	$	32,409		$	83,949		$	83,949

Cumulative sensitivity ratio		0.3	%		2.1	%		(7.1	)%		6.7	%		17.3	%		17.3	%

(A)		40% of outstanding balance considered repricable immediately and 60% repricable in the furthest time period.

(B)		Savings Deposits considered repricable in the one year time horizon.

The Company is cumulatively liability sensitive in the 7 to 12 month time frame and cumulatively asset sensitive in each of the 3 month or less, 4 to 6 months, 1 to 5 year, and over 5 year timeframes. Certain liabilities such as NOW and passbook savings accounts, while technically subject to immediate repricing in response to changing market rates, historically do not reprice as quickly nor to the extent as other interest sensitive accounts. Therefore, to include the entire balance of these liability accounts in the earliest repricing period would be unrealistic. To compensate for the fact that changes in general market interest rates will not be fully reflected in changes in NOW rates, only 40% of NOW balances is included as immediately rate sensitive based on the Company’s own and industry repricing experience. Also, passbook savings will not reprice as quickly as market rates and therefore the repricing of savings deposits is included in the 7 to 12 month repricing period, based on the Company’s repricing experience. Because of non-interest bearing liabilities, total interest-earning assets are substantially greater than the total interest-bearing liabilities and therefore over time the effects on net interest income from changes in asset yield will be greater than the change in expense from liability cost. Accordingly, if market interest rates should decrease, the net interest margin would decrease. Conversely, if rates increase the net interest margin would over time increase and this is particularly true over longer time horizons since the Company has more total assets subject to rate changes than total liabilities that are rate sensitive.

Even in the near term, the $34.6 million one year cumulative negative sensitivity gap exaggerates the probable effects on earnings in a rising rate environment for two reasons. First, the liabilities subject to repricing are predominately not indexed to any specific market rate and therefore offer the Company the opportunity to delay or diminish any rate repricings. Second, a static gap model does not factor the effects of growing volumes which would likely include greater additional rate sensitive assets than rate sensitive liabilities. Further, in this current rate environment, the Bank has been originating loans with interest rate floors. The effect of this has been to decrease the volatility of net interest margin due to the fact that these loans behave similar to fixed rate loans in periods that have a significant range of interest rate changes.

Interest-earning assets and other time deposits are presented based on their contractual terms. It is anticipated that run off in any deposit category will be approximately offset by new deposit generation. Since the Company has experienced steady growth in deposits, no net run off in any deposit category is assumed in the interest rate sensitivity table. It is the Company’s policy to maintain its cumulative one year gap ratio in the –20% to +10% range. At June 30, 2002, the Company was within this range with a one year cumulative sensitivity ratio of –7.1%.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

All financial institutions have financial instruments which are subject to market risk comprised of interest rate risk, foreign currency exchange rate risk, commodity price risk and other relevant market risks, such as equity price risks. The Company has assessed its market risk as predominately interest rate risk.

The following interest rate sensitivity analysis information as of June 30, 2002 was developed using simulation analysis of the Company’s sensitivity to changes in net interest income under varying assumptions for changes in market interest rates. Specifically, the model derives expected interest income and interest expense resulting from an immediate and parallel shift in the yield curve in the amounts shown.

These rate changes are matched with known repricing intervals and assumptions for new growth net of expected prepayments. The assumptions are based primarily on experience in the Company’s market under varying rate environments. The imbedded options that the Company’s loan customers possess to refinance are considered for purposes of this analysis and cause the larger decreases in income in a declining rate scenario versus the income increases in the same size rising rate scenario.

This analysis intentionally exaggerates interest sensitivity. For the sake of simplicity and comparability, an immediate change in rates is assumed. However, any significant change in actual market rates would probably be phased in over an extended period of time. This phase in would reduce the net interest income effects for any absolute change in rates. Also, the Company has been originating adjustable rate commercial loans with interest rate floors that are currently at rates higher than the index and margin on the loans would indicate. An example would be a loan at Prime plus 1% but with a 7.0% floor. The Company currently has in excess of $70 million of these types of loans where the loan rates are at the floors. The effects of this are twofold. First, this has benefited our margins currently since we have assets earning yields higher than would be the case absent the floor rates. Second, in a declining rate environment and in a limited rising rate environment those “adjustable” rate loans act like fixed rate loans. This limits the Company's loss of interest income when rates decline but does constrain income gains in a rising rate market. In general, having this significant amount of loans at their floors reduces the Company's overall rate sensitivity.

The Company attempts to retain interest rate neutrality by generating mostly adjustable rate loans and managing the securities and Fed Funds positions to offset the repricing characteristics of the deposit liabilities.


(Dollars in thousands)	Interest Rates Decrease					Interest Rates		Interest Rates Increase
	200 BP			100 BP		Remain Constant		100 BP			200BP

2002 Interest Income		28,168			30,157		32,180		34,026			36,172
2002 Interest Expense		7,119			8,190		10,437		12,664			14,891

Net Interest Income		21,049			21,967		21,743		21,362			21,281

Change in net income after tax vs constant rates		(433	)		140				(238	)		(288	)

Part II. OTHER INFORMATION


Item 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

		On May 28, 2002, at the annual meeting of Company shareholders, the shareholders reelected the following directors: Edward V. Lett, Derek D. Martin-Vegue, Joseph H. Roth, Jr., Robert A. Zolten, M.D., and Thomas J. Longe and also approved the engagement of BDO Seidman, LLP as independent certified public accountants for the Company. The directors continuing in office following the meeting were: Edward V. Lett, Derek D. Martin-Vegue, Joseph H. Roth, Jr., Robert A. Zolten, M.D., Thomas J. Longe, Gretchen K. Holland, Marvin F. Schindler, Millard J. Younkers, Jr., Armando J. Henriquez, and James R. Lawson, III.

Item 6.		EXHIBITS AND REPORTS ON FORM 8-K

		(a) Exhibit 99 — Report of Independent Certified Public Accountants
		(b) No reports on Form 8-K were filed during the quarter ended June 30, 2002.

CERTIFICATION

Each of the undersigned do hereby certify that this report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the report fairly presents, in all material respects, the financial condition and results of operation of the Issuer.


Date: August 12, 2002		/s/ Edward V. Lett Edward V. Lett President and Chief Executive Officer



		/s/ David P. Johnson David P. Johnson Executive Vice President and Chief Financial Officer

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		TIB FINANCIAL CORP.



Date: August 12, 2002		/s/ Edward V. Lett Edward V. Lett President and Chief Executive Officer



		/s/ David P. Johnson David P. Johnson Executive Vice President and Chief Financial Officer

		million at June 30, 2002, may need to be charged off for regulatory purposes in December 2002 if the property has not yet been liquidated. Since the Company believes this amount is ultimately realizable, the Company does not anticipate that this amount will be required to be written off on its financial statements prepared under generally acceptable accounting principles. Even if the amount is required to be charged off for regulatory purposes, the Bank and Company would remain well capitalized under the capital adequacy guidelines established by the federal bank regulators.

(c)		For the purpose of this computation, total loans include other real estate owned and other assets.

(d)		Other real estate owned increased approximately $1.0 million from December 31, 2001 to June 30, 2002, due to the repossession of two commercial properties in the second quarter of 2002.